Hong Kong is among the most tax-friendly cities in the world, according to the 2014 Paying Taxes study by the World Bank and IFC. Many foreign investors are starting up their companies to experience what it has to offer. If you’re new to this setting, however, you might want to know more about your tax obligations before proceeding:
Anybody planning to start up, or already owns Hong Kong companies, needs to comply with the Business Registration Ordinance (Cap. 310) and display a valid Business Registration Certificate. Application for business registration should take place within a month from the date the business started operations.
If your business changed in any sort, you need to notify the Inland Revenue Department (IRD) right away. A business registration isn’t a licence to trade, though, nor does it regulate your operations. It’s for the records of the IRD, so they can open and update tax files when necessary.
Property Tax and Stamp Duty
Property tax is necessary if you’re earning income through the properties you let in Hong Kong. You have to present rental records for the previous seven years, including any supporting evidence, to the IRD. If you ever received a tax return, you need to file it as well.
The Stamp Duty Ordinance (Cap. 117) involves documents related to property transactions, such as residential property and tenancy agreements, deliveries on sale, and transfer of stocks. Application is acceptable through e-Stamping service, which you need to pay online.
Anybody doing trade, practicing a profession, or operating a business in Hong Kong is subject to tax on all profits. This applies whether you’re a trustee or under a sole proprietorship, partnership, and corporation. There are exemptions for profits gained from the sale of capital assets, though.
Profits Tax is all the same for residents and non-residents. Profits derived from abroad are not taxed, while profits gained or derived from Hong Kong are taxable. When filing for a Profits Tax Return, you can use electronic filing services (eTAX). If you want to know the tax rates, visit GovHK for a detailed explanation.
It’s true that taxes in Hong Kong are making the lives of business owners easier. All you need is to know what you have to file and pay for to avoid disputes in the future.